Islamic Banks
A Thesis submitted for the Degree of Doctor of Philosophy By
Fahad Al-Shamali
September, 2015
ii
Declaration
I affirm that all the content in this thesis that is not mine, to
the best of my
understanding, has been acknowledged. The substance presented in
this
thesis has not been submitted in the past by the author for degree
at this
university or any other.
Under Review Journal Papers
Al-Shamali, F., Irani, Z., and Sharif, A. (2015). “Participatory
Decision-Making
and Islamic Work Ethics: An Islamic Banking Case”. International
Business
Review. (Under Revision).
All praise be to Allah, the all-powerful, the all merciful.
To the Prophet (PBUH),
A man, who although I have never met or seen, lived a life that
helped me in
my most difficult of times. To my greatest supporter, teacher,
influence and
friend, if any person is to thank, it is you.
My Mother,
My Father,
My Sister Sarah,
My Brother Ahmed,
iv
Acknowledgment
I am ever grateful for my supervisor, Professor Zahir Irani, for
all his
support and patience; whose knowledge and kindness aided both my
life
away from home and my research greatly. Without him I doubt I would
have
been able to complete this epic task, thank you. Professor Amir
Sharif
provided me with much direction and help; I am fortunate to have
such a
respected academic as my guide.
Many thanks to Professor Mohammed Husney of Kuwait University
Statistical Department for his kindness and assistance and
Professor Thabet
Edrees for his sharing of vast knowledge, it was truly priceless.
Much
appreciation is guided towards Professor Ali Ansari and Dr. Noreen
Khan,
whose guidance from a bachelor’s degree until my PhD has never
faded,
thank you.
Last, but not least, I would like to thank the senior management
of
Kuwait Finance House (KFH), Warba, United Ahli Bank, Boubyan,
and
Kuwait International Bank (KIB) for their full support and
enthusiasm in my
data collection.
I thank you all from the bottom of my heart.
v
Abstract
One of the world’s fastest growing banking methods today is
Shariah
compliant banking, with the number of Islamic banking and
finance
institutions growing from one in 1975 to more than three hundred
today in
more than seventy-five countries around the world, holding assets
valued
around US$1 trillion. However, research and understanding regarding
the
management in decision-making in the Islamic banking industry
is
underdeveloped. This study, unlike previous research, applies
Islamic Work
Ethics (IWE’s) and Participatory Decision-Making (PDM) to inspect
both
their influence and outcomes. However, despite PDM’s maturity and
validity
in different contexts, very little published literature strives to
extend its
capability in the Islamic banking context. Both PDM and IWE’s have
found
to lead to greater job satisfaction and commitment; however,
interrelationships have not yet been studied. As a result, it is
unclear if the
PDM approach to determining whether or not employees should be
involved
in the decision-making process is applicable with IWE’s or within
Islamic
banking and developing country contexts. As a result, a need arises
for the
addition of factors, which may potentially develop the
understanding of
employee involvement in decision-making, as misuse and lack
of
understanding of PDM may lead to low job satisfaction and
commitment.
The current study is sorted into multiple stages as to carry out
the entire
research. To start with, the introduction section of this study
provides the
setting of the research including the background of the study,
aims,
objectives and research questions. Moving on, a critical literature
review is
provided as to identify key points in previous studies. As a
result, research
hypotheses are extracted, which provides the relationships being
tested, of
which the theoretical framework is based. Next, the methodology,
which is
applied in the study, is identified and justifications for data
collection
methods, analysis tools and multiple tests are provided.
Afterwards,
questionnaires were distributed to front desk employees working
within the
Kuwaiti Islamic banking industry as the sample for primary data.
Following,
vi
data analysis is carried out, from which the findings and accepting
and
rejecting of analysis is reliant upon. Outcome identified that
employee
desires to be involved in decision-making was greatly influenced by
IWE’s.
Also, employees desire to be involved in decision-making
differentiated
significantly based on whether or not decisions were based on
actual work
or regarding fellow co-workers. Finally, theoretical and
managerial
implications are provided, as well as suggestions for future
research.
vii
1.3 Research Aim and Objectives
..........................................................................
4
1.4 Research Questions
............................................................................................
5
1.5 Theoretical Contributions
...............................................................................
6
Chapter 2: Literature Review
.................................................................................
9
2.1 Introduction
..........................................................................................................
9
2.2 Stakeholder Theory and Stakeholder Involvement in Decision-
making
........................................................................................................................
11 2.2.1 Stakeholder Management and Processes
.......................................................... 11 2.2.2
Stakeholder Theory and Models
...........................................................................
12 2.2.3 Internal Stakeholder Involvement in Decision-making
............................... 14
2.3 Participatory Decision-making
...................................................................
15
2.4.2.1 Employee Affective Commitment
........................................................................
26 2.4.2.2 Employee Normative Commitment
....................................................................
27 2.4.2.3 Employee Continuance Commitment
................................................................
27
2.5 Participatory Decision-Making and Job Characteristics
.................... 28 2.5.1 Task Significance
........................................................................................................
28 2.5.2 Feedback
........................................................................................................................
31 2.5.3 Autonomy Component
..............................................................................................
32 2.5.4 Organizational Communication and Dimensions
........................................... 33 2.5.6 Supervisory
Communication with Employees
................................................. 36
viii
2.7 Cultural Influences on Employee Involvement
..................................... 41 2.7.1 Power Distance and
Contextual Variations
...................................................... 42 2.7.2
Individual Collectivism Identification
................................................................ 43
2.7.3 Participatory Decision-making in Developed and Developing
Countries
......................................................................................................................................................
44
2.8 Islamic Work Ethics and Employee Involvement
................................. 46
2.9 Shariah Banking Law
......................................................................................
49
2.10 Principles of Islamic Banking
....................................................................
50 2.10.1 Risk Sharing
...............................................................................................................
50 2.10.2 Society, Ethics and Humanity
..............................................................................
52 2.10.3 Zakat: Donation Responsibilities
.......................................................................
52
2.11 Islamic Commercial Products and Services
......................................... 53
2.12 Gulf Countries and Kuwait
.........................................................................
54
2.13 The Progress of Islamic Finance and the Industry Growth
............ 56
2.14 Conclusions
......................................................................................................
59
3.1 Introduction
.......................................................................................................
62
3.3 Research Theoretical Framework and Hypotheses
............................. 66 3.3.1 Power Distance and
Participatory Decision-Making.....................................
69 3.3.2 Participatory Decision-Making and Job Satisfaction
..................................... 70 3.3.3 Participatory
Decision-Making and Employee Commitment ..................... 72
3.3.4 Job Satisfaction and Employee Commitment
................................................... 74 3.3.5
Islamic Work Ethics and Organizational Commitment
................................ 75 3.3.6 Islamic Work Ethics and
Job Satisfaction
.......................................................... 76 3.3.7
Islamic Work Ethics and Participatory Decision-making
............................ 77
3.4 Employee Demographical Influence on Employee Involvement ....
78
3.5 Conclusions
........................................................................................................
79
4.1 Introduction
.......................................................................................................
82
4.3 Quantitative Evidence
....................................................................................
86
4.5 Sampling and Size of Target
.........................................................................
92
4.6 Population and Sample
..................................................................................
94
ix
4.7 Data Collection Procedure
............................................................................
95
4.8 Survey Questionnaire Constructs
............................................................... 96
4.8.1 Questionnaire Design and Layout
.....................................................................
101 4.8.2 Closed-Ended Questions
.......................................................................................
103 4.8.3 Measuring Tool: Likert Scale
...............................................................................
104
4.9 Arabic Version of Questionnaire
..............................................................
105
4.10 Pilot Study and
Protocol............................................................................
105
4.11 Data Analysis Methods
..............................................................................
108
4.12 Exploratory factor analysis
......................................................................
109
4.13 Structure Equation Modelling
.................................................................
109 4.13.1 Measurement model
............................................................................................
110 4.13.2 Goodness of fit indices
........................................................................................
110 4.13.3 Model Estimates
....................................................................................................
111 4.13.4 Reliability of Measurements
.............................................................................
114 4.13.5 Validity
.....................................................................................................................
114 4.13.6 Structural model evaluation and hypothesis testing
............................... 114
4.14 Conclusions
....................................................................................................
115
5.1 Introduction
.....................................................................................................
117
5.2 Research Hypotheses
Recap.......................................................................
118
5.4 Statistical Measures of Research Dimensions
..................................... 122
5.5 Effect of Sample Demographic Characteristics
.................................... 123 5.5.1 Effect of Gender on
Tested Factors
...................................................................
124 5.5.2 Effect of Different Age Groups on Tested Factors
........................................ 125 5.5.3 Effect of
working Experience on Tested Factors
.......................................... 127 5.5.4 Influence of
Education Level on Tested Factors
........................................... 129 5.5.5 Effects of
University on Tested Factors
...........................................................
131
5.6 The Fitted Model
............................................................................................
132
5.7 The Correlation Structure
...........................................................................
133
5.8 Composite Reliability and Average Explained Variance
.................. 134
5.9 Conclusions
......................................................................................................
135
6.1 Introduction
.....................................................................................................
137
6.2 Testing the Influence of Power Distance
............................................... 139 6.2.1 H1a:
Power distance negatively affects desired decision-making regarding
work within Islamic banks.
........................................................................
139 6.2.2 H1b: Power distance negatively affects desired
decision-making regarding co-workers within Islamic banks.
........................................................... 140
6.2.3 H1c: Power distance negatively affects involvement in
decision-making regarding work within Islamic banks.
........................................................................
140
x
6.2.4 H1d: Power distance negatively affects involvement in
decision-making regarding employees.
.......................................................................................................
141
6.3 Testing the Influence of Islamic Work Ethics
....................................... 141 6.3.1 H5a: Islamic Work
Ethics positively effects employee normative commitment.
........................................................................................................................
142 6.3.2 H5b: Islamic Work Ethics positively effects employee
affective commitment.
........................................................................................................................
142 6.3.3 H6: Islamic Work Ethics positively effects employee job
satisfaction. 143 6.3.4 H7a: Islamic Work Ethics positively affects
desired involvement in decision-making regarding work.
................................................................................
143 6.3.5 H7b: Islamic Work Ethics positively affects desired
involvement in decision-making regarding co-workers.
...................................................................
143 6.3.6 H7c Islamic Work Ethics positively affects involvement in
decision- making regarding co-workers.
......................................................................................
144
6.4 Testing the Influence of Participatory Decision-making
................. 144 6.4.1 H2a: Involvement in decision-making
regarding work positively affects job
satisfaction.....................................................................................................................
144 6.4.2 H2b: Involvement in decision-making regarding employees
positively affects job satisfaction.
......................................................................................................
145 6.4.3 H3a: Desired involvement in decision-making regarding
work positively influences Normative and Affective commitment.
................................................. 145 6.4.4 H3b:
Involvement in decision regarding work positively influences
Normative and Affective commitment.
......................................................................
146 6.4.5 H3c: Involvement in decisions regarding co-workers
positively influences Normative and Affective commitment.
................................................. 146
6.5 Testing the Influence of Job Satisfaction
................................................ 147 6.5.1 H4a: Job
satisfaction of Islamic bank employees positively effects employee
normative commitment.
.............................................................................
147 6.5.2 H4b: Job satisfaction of Islamic bank employees
positively effects employee affective commitment.
.................................................................................
147
6.6 Variations of Revised
framework.............................................................
148
References
...............................................................................................................
166
xi
Table 2.2: Cultural Dimensions: Power Distance and Individual
Collectivism
..................................................................................................................
44
Table 2.4: Common Islamic Products and Services
...................................... 54
Table 3.1: Equilibrium Saturation and Deprivation
Comparison............ 64
Table 4.1: Survey Based Studies
...........................................................................
88
Table 4.2: Questions used to test Variables
..................................................... 99
Table 4.3: Organizations in which Pilot Study was Carried Out
............ 106
Table 5.1: Explained Variance, Reliability and
Coefficients..................... 119
Table 5.2: Explained Variance, Reliability and
Coefficients..................... 123
Table 5.3: Constructs and Abreviations
..........................................................
124
Table 5.4: Descriptive Statistics to All
Dimensions..................................... 125
Table 5.5: Mann-Whitney Test
............................................................................
125
Figure5.6: Statistical Testing of Age Groups
.................................................. 126
Table 5.7: Statistical Testing of Work Experiance
....................................... 129
Table 5.8: Statistical Testing of Education
..................................................... 131
Table 5.9 Statistical Testing of Univesities
..................................................... 133
Table 5.10: Correlation between Constructs
................................................. 134
Table 5.11: Effects of Exogenous variables on Endogenous Variables
136
Table 6.1: Hypotheses and Relationships
....................................................... 139
Table 6.2: Variation of theoretical framework and revised framework
. 149
xii
xiii
Figure 2.2: Decisional Equilibrium and Decisional Deprived
influence on
Job Satisfaction
............................................................................................................
22
Figure 2.4: Task Significance related factors
................................................... 29
Figure 3.1: Research theoretical framework of implantations
and
outcomes of participatory decision-making
.................................................... 68
Figure 4.1: Disertation Roadmap
........................................................................
91
Figure 5.1: Bank response rates
.........................................................................
120
Figure 6.1: Revised framework
..........................................................................
151
Figure 6.2: Pre-Tested theoretical framework
............................................. 152
Chapter 1: Introduction
Chapter One: Introduction
1.1 Introduction
The term Islam, when translated to English, means to surrender to
the will of Allah
in every action one may take in life (Mellahi and Budhwar, 2010).
Studies conducted
on Islam during earlier centuries have found that during that time
period, rulers put
great importance in encouraging businessmen towards trade and
business activities
(Ali and Al-Owaihan, 2008).
It has been reported that it was only after the 1940’s that Islamic
finance
started to become an area of interest for both investors and
researchers. Much
credit is given to authors such as Qureshi (1946), Uzair (1955),
Maududi (1961) and
Al-Sadr (1974). All of these authors are recognized for
contributing significantly to
the modernization and development of Islamic banking and finance.
Because of the
important contributions from Islamic scholars, as mentioned above,
Islamic banking
and finance has developed into a more practical model that is
widely being used in
current financial systems. Islamic banking is one of the fastest
international
growing banking methods in financial markets today, originating
form Arabia; it is
now found operating in a number of western countries (Khan and
Bhatti, 2008).
The following Chapter provides the background to the thesis
including
Participatory decision-making (PDM), decision-making within
organizations and
Islamic bank and financial institutions. Also, the study
significance, research aim
objectives, research methodology, contributions, novelty and
dissertation road map
will be reviewed. Furthermore, the importance of the study is
emphasised.
Chapter 1: Introduction
1.2 Significance of Decision-Making in Islamic Banking
There is a lack of research on how Shariah compliant banks
communicate with their
stakeholders. Additionally, there is a shortage of research on
Middle Eastern
business managerial decision-making. It would be of interest to
explore how the
relationships of individuals within Shariah compliant banks based
in the Middle
East affect decision-making. The following sections identifies the
link between
decision-making in organizations and PDM, as well as discussing the
current state of
Shariah compliant banks and institutions, in which this study has
collected primary
data from.
The distribution and sharing of influence amongst senior managers
non-
management employees (Mitchell, 1973) and co-operative
decision-making (Locke
and Schweiger, 1979), has been a topic of discussion for more than
50 years now
and has been focused on by organizational researchers. Influence
sharing and joint
decision-making has also been referred to as PDM. Previous studies
have explored
relationships between PDM in relation to employee outcomes
including employee
commitment, performance and job satisfaction. PDM most
comprehensive
definitions was proposed by Heller et al., (1998, p. 42) who
suggest that it is “the
totality of forms, i.e. direct (personal) or indirect (through
representatives or
institutions) and of intensities, i.e. ranging from minimal to
comprehensive, by
which individuals, groups, collectives secure their interests or
contribute to the
choice process through self-determined choices among possible
actions during the
decision process”.
1.2.2 Participatory Decision-Making
Influence sharing and joint decision-making is referred to as PDM.
PDM is
defined as shared influence of managers and employees in a firm; it
is also used
as a motivational program with the function of enhancing both job
satisfaction
and individual performance (Vroom, 1960; Mitchell, 1973; Wagner
and
Gooding, 1987; Cotton, 1993).
3
Heller et al. (1998) refers to PDM as “the totality of forms, i.e.
direct
(personal) or indirect (through representatives or institutions)
and of intensities, i.e.
ranging from minimal to comprehensive, by which individuals,
groups, collectives
secure their interests or contribute to the choice process through
self-determined
choices among possible actions during the decision process” (p.
42). Additionally,
Cotton et al. (1988) summarizes PDM as explained below:
involving employees directly within the decision-making
process
alongside managers;
managers taking into account the views and opinions of
employees
when faced with a decision;
employees being recognized as stakeholders the organization;
having employee participation unions.
1.2.3 Islamic Bank and Financial Institutions
Many reasons can be identified for the continuous development and
demand for
Islamic banking. To start with, there is a high demand being set by
numerous
countries and economies consisting of both Muslims and non-Muslims
for Shariah
compliant banking services and products. The second reason is
because of the
growing wealth amongst Arabs in the Gulf region. The third reason
is because of the
increasing strength of many Islamic products and services has
gained the attention
of both Muslim and non-Muslim investors around the world. Finally,
Islamic
banking has been strong and stable in avoiding any serious
financial crisis,
excluding including a few minor incidents such as Dubai Islamic
Bank in 1998 and
Ihlas Finans in Turkey in 2001 (Masood, 2011).
The number of Islamic finance institutions around the world has
risen from
only 1 in 1975 to over 300 today in more than 75 countries around
the world,
showing undoubtedly the popularity and trust in Islamic
institutions increasing
dramatically. The main areas serving as homes to the Islamic
institutions are the
Middle East and South East Asia (Bahrain and Malaysia being the
biggest hubs)
whilst Islamic institutions are now setting up in Europe and also
the United States.
It is estimated that the total assets exceed $250 million, though
cross boarder data
remains limited, they show a growth rate of an estimated 15% a year
(Masood,
2011).
The Islamic banking and finance industry have increased
dramatically,
especially during recent and present times in all international
markets. It is noted
that Islamic Banks globally have performed well in terms of
consistency and
reputation amongst customer’s investors (Choudhury and Hussain,
2005). A report
by Khalid and Amjad (2012) stated that there are more than 500
Islamic financial
establishments operating around the world today, with assets being
valued at
around US$1 trillion in total. Financial markets can prepare
themselves to continue
to compete with Islamic financial firms as demand for Islamic
products and services
are on the rise (Khalid and Amjad, 2012). It has also been
concluded that the
Shariah compliant banking sector will continue to grow and develop
to new
markets and demands in the future (Akram et al., 2001).
1.3 Research Aim and Objectives
As a result of identifying the scope of this research, the research
aim and objectives
will be presented. The aim of this research will be to develop a
theoretical model to
assist in quantitatively identifying the nature of Islamic banking
decision-making
within Shariah compliant banks and outcomes with regards to front
desk
employees, whose role in the Islamic bank is vital as they are
responsible for
customer inquires, complaints, cash deposits/withdrawals, issuing
and handling of
bank certified cheques as well as applying regulations from the
Kuwait Central
Bank. Based upon this the objectives are the following:
1) To carry out a critique of the literature on employee
involvement in decision-
making and related factors as a context to the research;
2) To develop a theoretical framework which is suitable for PDM in
relation to
power distance, IWE’s, PDM, job satisfaction, affective commitment
and
normative commitment within the Islamic banking industry Islamic
banking;
3) To develop a research design based upon the selection of a
research
methodology that will seek to capture and address research
questions
through a primary research data collection instrument and relevant
data
analysis approach;
5
4) To evaluate the involvement of employee members in
decision-making with
regards to its effect on outcomes;
5) To revise the theoretical framework in light of the research
findings.
By achieving these aims, it will contribute in pursue of
understanding
stakeholder relationships within the Shariah compliant banks,
hence, assisting
managers and academics to identify strengths and weaknesses of the
involvement
of employees within the decision making process.
1.4 Research Questions
As little research has been conducted within the domain of PDM in
developing
countries (Scott-Ladd et al., 2005), more specifically, the Islamic
banking sector in
Kuwait, a number of research questions arise. As such, based upon
the prior
discussion and relevant literature of PDM, this study is directed
in a way such to
answer a number of research questions, of which the research
hypothesis will
answer (as can be seen in the hypotheses Chapter), consisting of
the following:
No previous studies have tested or identified whether or not front
desk
employees within Islamic banks are influence by any factors
with
regards to the involvement in PDM. Hence, a question that is raised
in
the research is do IWE’s restrain or encourage employees to be
involved
in PDM?
There is a scarcity of research regarding if front desk employees
within
Islamic banks express and desire to be involved in PDM, also,
whether
managers are meeting the desires or lack of desires to be involved
in
decision-making. As such, another question raised with regards to
the
research is whether or not there is a desire from employees
within
Islamic banks to be involved in PDM, if so, are their desires being
met?
As a result of the previous research questions, outcomes of PDM
within
Islamic banks are inconclusive. Consequently, a question raised
from the
research is outcomes such as is employee job satisfaction and
employees
commitment influenced by the involvement of front desk employees
in
decision-making?
1.5 Theoretical Contributions
The development of the theoretical framework demonstrates the
novelty in the
research domain where to the knowledge of the researcher, variables
tested have
not been studies before, within the Islamic banking sector, which
has also not been
tested with regards to PDM and both normative and affective
commitment. The
framework uniquely identifies the inter-relationships between
IWE’s, power
distance, PDM, normative commitment, affective commitment and job
satisfaction as
a representative of real time involvement/ lack of involvement of
employees within
the decision making process. More specifically, previous empirical
studies
conducted in the field of employee involvement in decision-making
have not tested
the direct influence of IWE’s on PDM, affective commitment and
normative
commitment as to evaluate influences and outcomes. Also, no
previous research has
examined the influence of PDM on affective commitment. As such, it
is viewed that
the reviewed framework is unique, as no other study has examined
PDM in this
manner and results are the first of its kind to be
identified.
1.6 Stages of the Dissertation
As can be seen in Figure 1.1, following the introduction Chapter,
Chapter 2 sets out
to review current and past literature on participatory
decision-making and related
variables. The Chapter primarily focuses the gathering and
analysing of all the
relevant knowledge concerning the scope of research for this study
supported
through the development of the literature. Particular emphasis is
placed upon
decision-making and commitment as a basis of decision-making.
Chapter 3 develops
the theoretical framework and presents associated hypotheses. The
outcome of this
Chapter leads to the implementation of a research methodology in
Chapter 4. This
Chapter justifies the methodological approach and research design
in order to carry
out data the collection. Chapter 5 presents the research analysis.
Chapter 6 presents
the findings as a result of the analysis and discusses these
findings in detail; leading
way to a revised framework. This is revised based upon the
findings. Chapter 7
concludes the thesis and presents contributions and novelty of the
research along
with the implementations, limitations and recommendations for
future research.
Chapter 1: Introduction
Chapter 2 Power Distance
8
Chapter 1 reviewed and assessed the components and stages in which
the
research has been conducted. Areas of the literature which have
been covered
include Shariah compliant banks, decision-making in organizations,
and stakeholder
model and theory. This led the author to identify both the research
aim and
objectives and the research questions, which have been achieved
which underpin
the justification of the research. Following this section, the
contribution and novelty
achieved from the research has been identified. Finally, the stage
of the dissertation,
which has been provided and followed throughout the research, has
been justified.
Chapter 2: Literature Review
stakeholder involvement and PDM. This literature review will
include the
background of stakeholder theory, development of stakeholder theory
model
and stakeholder involvement in decision-making, to give the reader
a better
understanding of major developments that have shaped the study
topics. Also,
the literature review will highlight literature gaps which this
study will identify
and test within the Islamic banking sector in Kuwait.
Additionally, this Chapter discusses PDM with regard to its
application and
outcomes. It has been established that the likelihood of PDM
application is
often subject to the context in which it is found. Often, the
condition of PDM can
be categorized according to developed or developing country. The
benefits of
practicing PDM have also been found to vary within the literature
according to
context. For example, task significance, employee commitment and
supervisory
communication have been documented, which have also been found
to
influence job satisfaction, in developed countries but not
commonly
investigated within developing countries, which is the context of
this research.
This management style is also confronted by challenges, which can
be linked to
swaying the condition and outcomes. Firstly, managers have often
neglected
the involvement of employees in decision-making, in fear that
supervisory
power may be reduced. Additionally, cultural factors which have
been reported
as strong influencers of employee involvement in decision-making
are the
power distance between employees and managers; and individual
collectivism.
As it has been established that employees within high power distant
culture
are less likely to be involved within the decision-making process.
Commonly, in
individualistic cultures, individuals tend to make decisions
regardless of
suggestions made by coworkers. Finally, individuals within
collectivistic
Chapter 2: Literature Review
10
cultures tend to welcome assistance and input from coworkers when
faced
with tasks or decisions, hence, increasing involvement within
decision-making.
As identified in the literature, Middle Eastern countries have high
power
distance. Therefore, managers may be less willing to involve
employees in
decision-making, fearing a loss of power and also because
supervisors may feel
a sense of entitlement to make decisions independently. However, as
there is a
lack of research and evidence regarding PDM in the Middle Eastern
region, as
such, conclusions cannot be made. Furthermore, this context serves
and as
interesting backdrop for this study, as the competitive Islamic
banking
industry in Kuwait has been chosen. Although PDM implementation
and
outcomes have been tested in conventional banks within developed
countries,
the same cannot be said about Islamic banks, which is an innovative
banking
system that has seen much growth and fierce competition in the past
decades.
After the 1940’s Islamic finance started to become an area of
interest for
both investors and researchers. A reason for this rise in interest
is due to it
developing into a more practical model that is widely being used in
current
financial systems and is rapidly expanding in international markets
including
a number of Western countries. However, there has been a dearth of
research
regarding managerial approaches with regards to decision-making
aspect of
Islamic banking and in the developing countries, which it
operates.
Therefore, Chapter 2 will provide a critical analysis of existing
literature
regarding the involvement of non-management employees in
decision-
making. Due to the lack of literature regarding PDM in the Islamic
world, there
is a need to advance on existing literature on PDM and outcomes. As
a result, a
theoretical framework will assist in developing on existing
knowledge. Also,
the theoretical framework has been explained by the
hypotheses.
Chapter 2: Literature Review
making
Jongbloed et al. (2008) discussed that stakeholder theory has been
a topic
under development since 1963. Stakeholder theory has been under
speculation
since before Freeman’s ‘Strategic Management: A Stakeholder
Approach’,
published in 1984 was one of the first bodies of literature to
holistically discuss
the stakeholder framework. Gathering numerous strings of literature
to
develop stakeholder theory, Freeman merged corporate planning,
systems
theory, and corporate social responsibility. By doing this, a
managerial
understanding that identified four key stakeholder groups, composed
of;
owners, customers, employees and suppliers was developed.
Suggesting that
the state of literature on the topic of management theories at the
time was not
fit to “quantity and kinds of change which are occurring in the
business
environment” (Freeman, 1984), in addition to new industrial
relations and
changes in communication, amongst other things.
2.2.1 Stakeholder Management and Processes
Stakeholder management developed from stakeholder theory, and views
that
organization that take into consideration the opinions of
stakeholder interests
will have a competitive advantage over organizations that do not
(Post et al.,
2002). Scholars have reported that by collaborating with
stakeholders e.g.
employees, uncertainty will decrease and organizations will prove
to be more
flexible to different situations (Freeman, 1984; Harrison, 2003;
Yin-Hsi Lo,
2013). Organizations have found to increase decision-making
effectiveness by
interacting with employees, customers, communities and
governments
(Harrison and St. John, 1994; Kotter and Heskett, 1992; Hillman and
Keim,
2001). Primary stakeholders consist of the following (Clarkson,
1995; Starik,
1995):
Michael (1995) and Freeman (1984):
Categorize noteworthy groups of stakeholders with regards to
issues
being raised;
Define to what extent expectations and demands of stakeholder
groups are being fulfilled;
Adjust company policies and main concerns to fit with
stakeholder
interests and expectations.
2.2.2 Stakeholder Theory and Models
The stakeholder model shows that all stakeholders, regardless of
power or
influence, are connected to a company by dyadic relationships. In
other
words, the actions and decisions made by stakeholders can have a
direct
effect on other stakeholders (Freeman, 1984). Most popular
management
models have been represented in the form of visual representation,
as it is
particularly effective. Research has demonstrated a preference for
narrative
and visual knowledge among practitioners over the prevailing
prepositional
mode found in academia (Worren et al., 2002). A graphical framework
has
supported stakeholder theory, known as Freemans “Stakeholder
Model”.
The original model is the most common version of the stakeholder
model; it
involves the firm as the central role surrounded by shareholders,
suppliers,
civil society, employees, customers, competitors and the
government. The
beginnings of stakeholder theory developed from four main academic
areas,
which were sociology, economics, politics and ethics (Freeman,
1984).
Freeman (1984) explored the relationship between the company and
its
external environment, and the behavior within the
environment.
Chapter 2: Literature Review
The significance and value of Freeman’s stakeholder model
amongst
practitioners can be based on the power of visual representations
to
stakeholder’s theory (Fassin, 2008). Freeman created his
visual
representational model in which the firm was positioned at the
center and is
surrounded with stakeholders connected with the company. The
model
created by Freeman (1984) has been said to be a result of
inspiration from a
tool of sociology, which looks at the interactions/communication
between
individuals or groups (Fassin, 2009).
Freeman added more groups that were influenced or could
influence
firm’s activities and acknowledged a firm as being the center of a
number of
relationships (Crane and Matten, 2004). The framework of the
stakeholder
model visually shows the relationships between the various groups
of
participants that affect or can be affected by the firm. Later on,
Freeman
(2003) developed the model even further by updating it with
more
stakeholder groups and pressure groups being the biggest
development and
contribution to the model as shown in the developed version of
the
stakeholder model.
Hence, the model was reduced to five internal stakeholder
groups,
after competitors were removed from the internal category. As a
result,
internal stakeholders now consist of financiers, customers,
suppliers,
employees and communities. The six external stakeholders consist
of
governments, environmentalists, Non-Governmental Organizations
(NGO’s),
critics, media and others. However, as reported by Mainardes
(2012),
Freeman’s model of stakeholder influence has been faced with
criticism for
failing to differentiate between firms multiple stakeholder levels
of
influence (Fassin, 2009). As such, the following section takes a
closer look at
the internal aspect of the stakeholder theory and model with
regards to the
internal stakeholder’s involvement in decision-making.
Chapter 2: Literature Review
Stakeholder management developed from stakeholder theory, and
views
that organization that take into consideration the opinions of
stakeholder
interests will have a competitive advantage over organizations that
do not.
(Post et al., 2002).Scholars have reported that by collaborating
with
stakeholders e.g. employees, uncertainty will decrease and
organizations
will prove to be more flexible to different situations (Freeman,
1984;
Harrison, 2003; Yin-Hsi Lo, 2013).
Hence, organizations will prove to be more successful in
decision-
making by interacting with customers, employees, communities
and
governments (Harrison and St. John, 1994; Kotter and Heskett,
1992;
Hillman and Keim, 2001). Stakeholders should be looked at as
real
individuals and not as intangible individuals, so that managers of
the firm
consider co-operative aspects to help in making the proper
organizational
decision that have stakeholder interest as the main focus. In other
words,
normative stakeholder theory must focus on the construction of
value,
decision-making processes and relationships/communication with
real
individuals, specifically internal stakeholders (McVea and Freeman,
2005).
Research involving normative aspects of stakeholder theory propose
those
organizations incorporate stakeholder interests into
organizational
management, and demand full participation of internal stakeholders
within
the decision-making processes (Hendry, 2001; Flak et al.,
2008).
Organizations will prove to be more successful in
decision-making
employees (Harrison and St. John, 1994; Kotter and Heskett, 1992;
Hillman
and Keim, 2001). An approach, which has been identified to involve
internal
stakeholders within the decision-making process making, is PDM
(Scott Lad
and Marshal, 2004). This management style will be discussed in
the
following sections. This will consist of the identification of key
authors in
relation to PDM and a review this decision-making approach. Also,
the
importance of involving employees in the decision-making process
will be
discussed in relation to job satisfaction, performance and
commitment.
Chapter 2: Literature Review
15
Finally, employee’s actual and desired levels of PDM will be
reviewed.
2.3 Participatory Decision-making
Influence sharing between hierarchical superiors and their
subordinates in
joint decision-making, has been a topic of discussion for more than
50 years.
Influence sharing and joint decision-making is referred to as PDM.
It is also
defined as shared influence of managers and employees in a firm; it
is also used
as a motivational program with the function of enhancing both job
satisfaction
and individual performance (Mitchell, 1973; Wagner and Gooding,
1987;
Cotton, 1993). Heller et al. (1998) refer to PDM as “the totality
of forms, i.e.
direct (personal) or indirect (through representatives or
institutions) and of
intensities, i.e. ranging from minimal to comprehensive, by which
individuals,
groups, collectives secure their interests or contribute to the
choice process
through self-determined choices among possible actions during the
decision
process” (p. 42). Additionally, Cotton et al. (1988) summarizes PDM
as
explained below:
alongside managers;
managers taking into account the views and opinions of
employees
when faced with a decision ;
employees being recognized as stakeholders the organization;
having employee participation unions.
Concerned with the decisions that typically fall within the area of
the
management, PDM includes employees in this process. The PDM
process
refers to the distribution of influence between superiors and
hierarchically
inferior employees (Mitchell, 1973). This approach presents high
levels of
participation from employees in decisions, increasing the
communication
between them (Whitney, 1994). It can also be referred to as
involving
employees in decision-making which are most likely to be made only
by
managers. PDM commonly refers to the distribution of power and
decision-
making duties of managers towards employees. In other words, PDM is
the
cooperative method of sharing responsibility of decisions in the
workplace
(Heller et al., 1998).
Chapter 2: Literature Review
participation with regards to internal primary stakeholders
involvement in
decision-making (Tannenbaum and Schmidt, 1958; Scott-Ladd and
Marshall,
2004). An example of this can be observed by a study conducted
by
Tannenbaum and Schmidt (1958), in which they discussed
autocratic-
democratic continuum model. The autocratic-democratic continuum
model
puts forward the assumption that individuals primarily liable in
the
decision-making process (e.g. managers) can use a ranging amount
of
commanding behaviours. This amount of commanding behaviour can
array
from “boss centre leadership” (autocratic) to
“employee-cantered
leadership” (democratic). When choosing to use the boss
cantered
leadership or the employee-cantered leadership approach; often
depends on
the level of “freedom” in which managers are willing to distribute
amongst
other employees when faced with decision-making. It is important to
keep
in mind that authority and freedom are not limitless and neither
extreme is
preferred (Tannenbaum and Schmidt, 1958).
Also it is important to recognize that conditions vary regarding
PDM
in terms of the desired amount of PDM, the extent which employees
want to
be involved in decision-making, and the “actual” amount of PDM, how
much
employees are actually involved in decision-making. Three
conditions have
been reviewed below with regards to the influence of desired and
actual
levels of PDM consisting of decisional deprivation, decisional
equilibrium
and decisional saturation (Alutto and Belasco, 1972):
decisional deprivation: desired participation is higher than
actual participation;
to that of actual participation;
decisional saturation: desired participation is less than that
of
actual participation.
Previous studies suggest that diversity can be of great
valuable
because it can possibly enrich the firm’s cognitive ability, in
turn, benefiting
more effective decision-making. Employee involvement allows for
the
integration of different knowledge and information to multiple
issues, which
is highly beneficial for the quality of the decisions being making
(Black and
Gregersen, 1997). This can be achieved with the use of interaction
between
management and employees, as when interaction increases, more
information is being shared within the hierarchy structure
(Eisenhardt et al.,
1998). The importance of involving employees in decision-making is
also
apparent according to Miller and Monge (1986), in which it was
reported
that employees commonly obtain richer information and knowledge
than
that of managers, assisting in more informed decision-making.
When referring to the PDM approach, the key principal is to
increase
improvements in productivity, in which employees at all levels are
more
knowledgeable regarding decisions made in order to benefit
the
organization (Miller and Monge, 1986). As suggested by Miller and
Monge
(1986), the use of engagement will enhance the information use and
flow
within the organization. The reason for importance placed on PDM
is
because managers will have a better understanding of problems and
also
may have a better understanding of how to solve problems (Rodgers
and
Hunter 1993). Preventing PDM may result in a loss of
innovative
suggestions and organisational efficiency and productivity.
Anglo derived managerial approaches (e.g. PDM) can differ in
results
when implemented in numerous contexts; this is commonly found
when
contexts are different to cultural factors commonly found in
Western
countries (Hofstede; 1980). Research that has been conducted on PDM
has
been criticized for avoiding the acknowledgment of cultural
settings
(Hofstede, 2001; Sagie and Aycan, 2003). A study conducted by Ali
(1993)
concluded that participation of employees is viewed positively
within
America by managers, however, viewed negatively by managers
within
Chapter 2: Literature Review
18
Egypt. Little is known regarding the relationships and correlations
of these
relationships within developing countries.
researched in developed countries such as North America, Europe,
and
Australia, however, there is a lack of research with regards to
the
implementation of PDM within developing countries, more
specifically as
stated by Parnell and Crandall (2003) lacking within the Middle
East (Sagie
and Aycan, 2003; Scott-Ladd et al., 2005). Also, as reported by
Cotton et al.,
(1988, 1993), PDM resulting as a failure or success is also
dependent on
whether or not managers are supportive of the approach or not. A
study by
Hambrick (1994) found that organizational performance that is poor
often
results from managers failing to engage in a co-operational
information
process with employees. Even though employee involvement
development
courses are increasing, within the business realm, any empirical
evidence
suggesting that these courses will increase productivity is lacking
(Kearney
and Hays, 1994).
Marshall, 2004; Scott-Ladd et al., 2006) have quantitatively tested
and
supported that PDM will result in a positive correlation with
individual job
performance, increased job satisfaction, and enhanced
employee
commitment towards the organization within the Australian public,
private
and local government bodied, as can be seen in Figure 2.1.
Today,
researchers do not have evidence of a universal positive
correlation
between participation and productivity within an organizational
setting. As
such, highlighting the importance of determining the participation
type and
contextual setting that participative techniques occur within
determine the
likelihood of positive outcomes (Cotton et al., 1988; 1993).
Chapter 2: Literature Review
Figure 2.1: PDM Positive Relationships (adapted from literature by
author)
Previous studies have explored relationships between PDM in
relation to employee outcomes including employee commitment,
performance and job satisfaction. Outcomes of implementing PDM
have
caused various results, according to sampled sectors and settings.
For
example, PDM has found to have negative results within the public
sector
(Worsham et al., 1997). As argued by Worsham et al., (1997),
employee
involvement may have negative impact on job satisfaction; also,
Ledford and
Lawler (1994) have similarly reported that although employees may
desire
PDM, it may not necessarily result in positive outcomes.
Researchers such as
Wagner (1994) have reported that that the relationship between PDM
and
performance is minimal, while others reports have claimed that
the
relationship is statistically important (Sagie, 1994; Wagner et
al., 1987).
Finally, relationships between PDM employee outcomes include
employee commitment, performance and job satisfaction has been
tested by
numerous researchers including Mitchell (1973); Locke and
Schweiger,
(1979); Argyris (1957); England (1983); Porter and Lawyer (1968)
and
Tannenbaum and Schmidt (1958). However, there is still a scarcity
of
studies regarding these relationships.
20
Previous studies have concluded that indeed PDM can be used as
an
effective tool which can benefit managers in making highly
effective
decision-making. In turn, it is concluded that the implementation
of PDM
will enhance employee commitment, performance and job
satisfaction.
2.4 Advantages of Participatory Decision-making
The following section will review key advantages that have been
reported in
previous research concerning PDM. First, employee job satisfaction
will be
reviewed in multiple industries and contexts. Moving on,
employee
commitment will be identified consisting of employee affective,
normative
and continuous commitment.
2.4.1 Employee Job Satisfaction
Job satisfaction refers to the level of content an employee
perceives with
regard to their job. In other words, whether or not an employee
enjoys the
nature of work supervision (Spector, 1997). The significance and
weight of
job satisfaction comes from employees being more likely to
signify
outcomes on the basis that they are capable of influencing
decisions being
made. When employees are more involved in decision-making, levels
of job
satisfaction generally tend to be higher, in comparison with
employees who
are not involved in decision-making (Black and Gregersen,
1997).
A study conducted by Wright and Kim (2004) on the impact of
PDM
on job satisfaction involved the distribution of a questionnaire to
447
employees working for state agencies within America. Results showed
that
PDM had a significant positive effect on job satisfaction. The
previous study
by Wright and Kim (2004) concluded that PDM will also reduce
turnover
rates and absenteeism of employees. In this regard, supervisors who
intend
to adjust the organizational culture from traditional approaches
of
hierarchical structure to PDM should place importance on the
effects of
employee job satisfaction.
Research carried out by Scott-Ladd and Marshall (2004) tested
PDM
in relation to the public and private workforce within
Western
Australia. Surveys were dispersed with the use of the internal mail
systems
which included a cover letter contain contents informing the
participant
that their responses will remain confidentiality. PDM was found to
have a
direct positive influence on job satisfaction. Another study, also
conducted
in Australia by Scott-Ladd et al., (2006), examined PDM’s influence
on job
satisfaction medium-sized organizations, including one state and
three local
government agencies and a private hospital, of which 2000 surveys
were
distributed. Findings suggested that PDM did promote job
satisfaction and
commitment, however, literature regarding this relationship is
scarce.
In relation to employee job satisfaction, PDM has also been
tested
within the Pakistani Oil and Gas, Banking and Telecommunication
sectors
(Bhatti and Qureshi, 2007). After the distribution of
questionnaires, results
found the implementation of PDM was positively related to employee
job
satisfaction. Suggestions recommended by Bhatti and Qureshi (2007)
for
future research included carrying out research in more contexts
and
organizations in order to shed more light on PDM in relation to
employee
job satisfaction. Finally, a study conducted by Kim (2002) on
governmental
agencies set out to test and emphasise the relationship between PDM
and
job satisfaction. After the distribution of a survey to 4097
employees and the
use of multiple regression analysis, manager’s use of PDM was
positively
associated with employee job satisfaction. Evidence supporting that
PDM
has a positive correlation with job satisfaction has also concluded
that
employees who were categorized as being in decisional equilibrium
(i.e.
participating in as many decisions as desired displayed) more
job
satisfaction compared to employees who were more deprived of
making
decisions (i.e. not allowed to participate in decision-making)
(Schuler, 1980)
as displayed in Figure 2.2.
Chapter 2: Literature Review
Figure 2.2: Decisional Equilibrium and Decisional Deprived
influence on Job Satisfaction.
It can be concluded from these studies that the relationship
between
how much an employees’s desires PDM in comparison to how much PDM
an
employee actually receives plays an important role in relation to
employee
job satisfaction. Employees with high job satisfaction also reap
their
employers with benefits, these include; fewer absentees from
employees,
lower turnover rates and higher individual performance (Edwards et
al.,
2008; Harrisonet et al., 2006). Cotton et al. (1988) also explains
that
involving employees in decision-making can result in higher job
satisfaction.
However, the relationship between PDM and job satisfaction has
not
been without criticism (Ali, 1993; Lam et al., 2002). Although
employee
involvement in decision-making has demonstrated a generally
evident
relationship with job satisfaction, this correlation is also often
been referred
to as vague. Even though relationships between PDM and employee
job
satisfaction are strongly defended and supported in theoretical
literature
and research (Miller and Monge, 1986), empirical research does
confirm
that the implication of these correlations is lacking with regards
to PDM and
job satisfaction, which can result in mixed outcomes. The generally
accepted
belief that PDM will automatically influence employee job
satisfaction has
PDM
been regarded as inconclusive. Moreover, both and positive and
weak
relationships have also been found to exist between PDM and
job
satisfaction. Hence, additional research is recommended to tackle
such
issues.
Researches have concluded that a key advantage of PDM is the
influence over job satisfaction. As job satisfaction increases,
employee
turnover rates and absenteeism have found to decrease.
Employees
described as being decisional equilibrium (participating in as
many
decisions as desired displayed) more job satisfaction compared
to
employees who were more deprived of making decisions (not allowed
to
participate in decision-making) (Schuler, 1980).
2.4.2 Employee Commitment towards Organizations and
Decision-Making
Steers (1977) defines employee commitment as “the relative strength
of an
individual's identification with and involvement in a
particular
organization” (p. 46). Commitment has also been defined as the
strength of
an employee’s emotional attachment towards an organization (Allen
and
Meyer, 1997). Employee commitment suggests that individuals within
an
organization are willing to be more determined for the success of
an
organization, by partaking in such efforts such as being creative
or resolving
work related issues. As identified within the section, research has
identified
that as PDM increases; employee commitment also increased,
displaying a
positive relationship between the two factors (Kahnweiler and
Thompson,
2000; Scott-Ladd et al., 2006). On the other hand, as decisional
deprivation,
when desired PDM is higher than of actual PDM, increased,
employee
commitment decreased.
24
A study conducted by Alutto and Belasco (1972) also concluded
that
in America, both decisional deprivation, when desired PDM is higher
than
actual PDM, and decisional saturation, when desired participation
is less
than that of actual PDM, resulted in low employee commitment. On
the
other hand, a study conducted by Alutto and Acito (1974) found that
there
existed a positive relationship between decisional equilibrium
(symmetric
amount desired and actual PDM) and organizational commitment. In
other
words, as presented in Figure 2.3, both decisional deprivation
and
saturation reduce employee commitment while decisional
equilibrium
increases employee commitment.
Figure 2.3: PDM multiple influence on Employee commitment (adapted
from literature by author)
Commitment has been associated with multiple attitudes of
individuals within an organization including performance and
organizational behaviours (Carr et al., 2003; Ackfeldt and Coote,
2005). As
definite by Sousa and Coelho (2011), employees whom are deemed
as
committed to their organization are more likely to adopt behaviours
which
help contribute to the organizations success.
Employee
Committed employees are more likely to work towards the
accomplishment of organizational goals, exert high levels of effort
on behalf
of the organization, show acceptance of the organization’s major
goals,
values, and lower turnover rates (Mowday et al., 1982).
Employee
commitment has also been related to employee behaviours,
individual
performance and job satisfaction. Therefore, it is established that
a positive
relationship exists between employee commitment and job
satisfaction.
Scott-Ladd and Marshall (2004) tested PDM employees in the
public,
private and local government (including a state government agency,
three
local government agencies, a hospital, a resort hotel and a
small
manufacturing company) in relation to employee’s commitment
within
Australia. Surveys were distributed through internal mail systems,
and
covering letters assuring respondents of confidentiality and
explaining the
purpose of the study. PDM was found to positive relationship with
employee
commitment. Also, PDM in relation to employee commitment has
tested
within Pakistan in the Oil and Gas, Banking and Telecommunication
sectors
(Bhatti and Qureshi, 2007). Results concluded that the
implementation of
PDM was positively correlated with employee commitment.
Finally, Scott-Ladd et al. (2006) conducted research regarding
PDM’s
relationship on employee commitment within Australian medium
sized
organizations, including one state and three local government
agencies and
a private hospital. Findings proposed that PDM promoted
employee
commitment. Hence, one can notice a trend in which the
implementation of
PDM influences high employee’s commitment. However, research
concerning the relationship between PDM and employee commitment is
still
lacking research.
Moreover, research concerning employee commitment has been
scarce within the Arab region, with a few studies conducted in
Israel
(Dornstein and Matalon, 1989; Koslowski et al., 1988; Tzainer and
Latham,
1989; Gattiker and Cohen, 1990). The following section will discuss
the
three forms of employee commitment. These include affective,
normative
and continuance commitment. (Allen and Meyer, 1990; Mathieu and
Zajac,
1990; Meyer and Allen, 1997).
2.4.2.1 Employee Affective Commitment
The extent to which employees associate themselves to the
organization in
which they are employed in terms of emotional connection,
involvement
and identification is referred to as affective commitment. As
reported by
Porter et al (1974), affective commitment can be characterized in
three
different factors:
“belief in and acceptance of the organization’s goals and
values;
a willingness to focus effort on helping the organization achieve
its
goals;
In addition, Mowday et al (1979) also reported that affective
communication is “when the employee identifies with a
particular
organization and its goals in order to maintain membership to
facilitate the
goal” (p.225), in which Meyer and Allen (1997) also reported
that
employees remain committed to the organization out of free will.
Affective
commitment is also influenced by positive work involvements
and
organizational support, and may be measured by the strength of
an
employee’s involvement within the organization (Mowday et al.,
1979).
Finally, affective commitment is influenced by a robust belief in
the
acceptance of both the organization’s values, as well as goals in
which the
determination to apply a high amount of effort for the organization
and to
continue to be employed by the organization.
Chapter 2: Literature Review
Weiner’s 1982 work considers normative commitment as being a
“generalized value of loyalty and duty”. Hence, the degree to which
staff
believes they should be committed to their organization and can
be
influenced by social norms is referred to as normative commitment.
Meyer
and Allen (1991) go on to explain this type of commitment as “a
feeling of
obligation”. This feeling of obligation is not just a product of
internal
organizational culture, but also due to external social culture.
Such factors
that influence this “feeling of obligation” can include attitudes
towards
marriage, family and religion.
Therefore, employees may interpret feelings towards their
workplace as a moral obligation, similar to other more personal
aspects of
life (e.g. marriage). Since these feelings of obligation often stem
from other
personal aspects of life, the foundation for such emotions most
probably
transpire before an employee is taken aboard an organization (Allen
and
Meyer, 1996; Schappe and Doran, 1997).
2.4.2.3 Employee Continuance Commitment
Continuance commitment is the degree to which staffs wish stay
employed
by a particular organization, in comparison to the perceived costs
coupled
with them exiting. Therefore, factors of their employee package
(e.g.
benefits, insurance, bonuses) all significant when making a
decision
(Reichers, 1985). Another important factor to what employees
acquire
during their time at an organization is the attainment of
“non-transferable”
investments. Such investments include things like certain
retirement plans
and relationships (Reichers, 1985). Keeping this in mind, employees
who
develop a personal relationship or are committed to their employer
or
organization, will understandably find leaving their position
arduous
(Meyer and Allen, 1997).
Chapter 2: Literature Review
2.5 Participatory Decision-Making and Job Characteristics
The following section will discuss the influence of which arise
with the
implementation of PDM in relation to job characteristics including
task
significance, feedback and job specificity; and supervisory
communication.
Firstly, task significance, the importance of assigned tasks to
employees, will
be reviewed in relation to perceived social, the level of which
employees
identify the value of their work. Secondly, feedback will be
reviewed as a job
specify will be reviewed as a mediator between feedback and
employee job
satisfaction. Thirdly, the importance of supervisory communication
is
reviewed in relation to the involvement of employees within
decision-
making. Finally, employees demographic which have been found in
previous
studies to influence these outcomes are identified.
2.5.1 Task Significance
When a task assigned to an employee is influential and appreciated
by
internal and/or external stakeholders, this is referred to as task
significance.
Nowdays, employees have a growing desires to conduct work
which
benefits others as well as society, highlighting the importance of
task
significance (Colby et al., 2001). Organizations have recognized
this, and as a
result have offered more opportunities for significant tasks to
employees
(Thompson and Bunderson, 2003; Brickson, 2005). As presented in
Figure
2.4, PDM has found to have a positive relationship with task
significance.
Task significance is also reported as increasing employee
individual
performance and increases both employee commitment and employee
job
satisfaction, as reviewed in previous studies.
Chapter 2: Literature Review
Figure 2.4: Task Significance related factors (adapted from
literature by author)
An important aspect of task significance is perceived social
worth,
which is defined as the extent to which employees perceive the
value of
their contributions to the organization, and the degree to which it
is
recognized by others (Leary and Baumeister, 2000; Elliott et al.,
2005). Due
to this relationship, it becomes more common for employees to
receive
positive comments from supervisors; hence, employee efforts are not
going
unnoticed.
Higher levels of task significance also have advantageous
outcomes.
As task significance increases, employees will be more willing to
work
overtime time and put more energy and effort towards their tasks;
hence,
increasing employee commitment, also employee individual
performance
often increases. Therefore, it can be assumed that employee
individual
performance is strongly influenced by employee task
significance.
Additionally, research often concludes that task significance can
be
enhanced by changing employee perceptions towards tasks, making
them
more significant (Morgeson and Humphrey, 2006). Key studies
conducted
by Hackman and Oldham (1980), and Salancik and Pfeffer (1978)
support
that task significance does indeed influence job performance.
Task Significance
30
An example of this relationship between PDM and task significance
is
supported in a study conducted by Wright and Kim (2004) in American
state
agencies, in which the researchers concluded that their existed a
significant
positive relationship between the two factors. On the other hand,
result
concerning the relationship between PDM has varied, as can be seen
in a
study conducted by Scott-Ladd and Marshall (2004) in which they
tested the
impact of PDM on employees in the Australian public, private and
local
government institutes. Relationships were not found to exist
between PDM
and task significance, implying that results between PDM and
task
significance may vary according to context.
Therefore, employees perceive task significance as high,
employee
individual performance tends to increase as their tasks are noticed
and they
often are willing to work harder (Hackman and Oldham, 1980;
Salancik and
Pfeffer, 1978). Although such relationships are significant, little
research has
attempted to identify a causal relationship between task
significance and
employee individual performance (Dodd and Ganster, 1996). As
proposed
by Humphrey et al. (2007), it is encouraged that further research
be
conducted to examine the relationship between task significance and
other
performance related factors.
Also, multiple researchers have concluded that task significance
has a
positive correlation with job satisfaction (Brannon et al., 1988;
Farn et al.,
1993; Ting, 1997; Ling, 2008). However, results on whether
task
significance is related to employee job satisfaction have also
found to be at
times vague (Vroom, 1964). Researchers (Scott-Ladd and Marshall,
2004)
have identified that there exists a positive relationship between
PDM and
task significance. Also, outcomes of high task significance include
enhance
employee individual performance, higher employees commitment
and
employees expressing more job satisfaction. Surprisingly, although
task
significance has been presumed have a positive correlation with
job
performance, researchers have yet to identify a clear relationship
between
job satisfaction and task significance.
Chapter 2: Literature Review
Very limited amount of studies have attempted to identify the
relationships between task significance, PDM and job satisfaction
(Scott-
Ladd and Marshall, 2004). Hence, it is suggested that further
studies be
conducted on outcomes related to high task significance in order to
better
understand factors influenced by PDM.
2.5.2 Feedback
In addition to sharing influence and providing growth
opportunities, PDM
also requires information. In order to enable employees making
accurate
and effective decision or problem solving, they need access to
relevant
information. However, in cases where lower level employees
have
information, they typically have more knowledge of the work itself
but are
vague about objectives or results (Lawler, 1986). Therefore, to
increase the
likelihood of fruitful decision-making outcomes, both lower and
upper
management need to exchange in a two-way communication route. This
aids
lower management in understanding the goals, objectives and results
of
their day-to-day actions. In addition, upper management information
of
operational activities is enhanced with more details that they can
tweak if
necessary.
In addition to maximizing organizational efficiency, this exchange
of
information can also indirectly stimulate job satisfaction. This is
due to the
participation that is required of individuals during the
presentation or
distribution of information. Thus, employees may feel more
involved, that
their positions are of weight and they are required from
management
during the decision-making process (Miller and Monge, 1986).
Depending on the nature of the feedback, this can be a
significant
player in the employee-organization relationship due to the amount
of
information it can attain. Depending on the feedback of an
employee, one
can determine employee responsibilities, which can give a more
detailed
Chapter 2: Literature Review
32
understanding of a job description. Task clarity to begin with, has
been
found to have a positive effect on employee satisfaction (Ting,
1997).
Moreover, depending on the current task responsibilities,
organizations may
be able to forecast other potential tasks that could be taken on
later.
In general, employees attaining clarity with regards to their jobs
and
responsibilities have numerous advantages, such as decreasing
tension
accompanying vagueness of job description. Moreover, the
probability of
employees fruitfully accomplishing tasks surges (Wright and Davis,
2003).
2.5.3 Autonomy Component
The degree to which an employee has the freedom to go about their
work
schedule and accomplish certain tasks is known as autonomy (Hackman
and
Oldhan, 1976). Hence, employees who attain this job autonomy, have
a
sense of independence and authority over certain aspects of their
job (Sims
et al., 1979). Brey (1999: 15) argues that worker autonomy is
related to,
“the control that workers have over their own work situation”, and
draws on
a definition of job autonomy as, “the worker’s self-determination,
discretion
or freedom inherent in the job, to determine several task elements”
(De
Jonge, 1995: 13). Such tasks can include methods of doing a certain
job, pace
and prioritization.
Job autonomy does not necessarily require PDM to manifest.
Though
PDM does promote employees to participate in the decision-making
process,
it does not guarantee that they will have any more authority over
their own
work focus or other organizational operations (Evans and Fischer,
1992).
The degree of job autonomy fluctuates, which can influence employee
trust
in management. As job autonomy is the control employees have over
their
work, this can also influence how well an organization adapts to
change
(Weber and Weber, 2001).
Chapter 2: Literature Review
Positive outcomes have been associated with job autonomy. This
is
partly due to giving authority to employees who deal with the work
on a
daily basis, making first hand decisions that can lead to tasks
being
accomplished more efficiently (Sanchez and Perez, 2011). Another
study in
a developing country’s service sector reported that autonomy
had
significant impacts on both job satisfaction and affective
commitment.
Moreover, this concept has been known to reduce absenteeism and
staff
turnover rates (Kusluvan et al., 2010). In addition to the
mentioned
advantages of this approach, commitment towards the organization
has also
been experienced by employees (Slattery et al., 2010). Lastly, a
study
conducted by Katsikea et al., (2011) concurs with previous
findings
suggesting organizational commitment.
Sarangi and Swatee (2012) investigated the relationship
between
organizational culture and communication on employee
engagement
measured the organizational communication by using a scale
developed by
Clampitt and Downs (1977) and (1993). The dimensions of the scale
have
been extracted in Table 2.1:
Dimensions of
Scale
Description
Organizational
Integration
It refers to the extent to which employees are able to
identify
themselves as an integral part of the organization and
consider
themselves as being involved in its processes.
Supervisory
Communication
It includes the way in which supervisors reach out and
communicate with employees. They perceive the style and
nature of supervisory communication as being important
Personal
Feedback
It implies the extent to which employees are informed about
their progress, performance gaps and career plans.
Corporate
Information
This includes the extent to which employees are adequately
and
transparently communicated about the organization's policies,
Chapter 2: Literature Review
This includes the extent to which employees are adequately
and
transparently communicated about the organization's policies,
strategies and standing.
communication, which evolve through interactions with
members in the organization. It instills a sense of belonging
to
the in-group in their members.
Media Quality It refers to the quality of information shared with
employees. It
also addresses the channels and mediums, which are chosen for
the purpose of communication to improve the speed, accuracy
and content of communication.
towards their supervisors. It refers to the support and trust
directed by the subordinates for their supervisors
Table 2.1: Organizational Communication
Sarangi and Swatee (2012) stated that there is a need for
future
research to conduct similar research in a bigger and broader based
sample
in order to further support and increase the understanding of
the
relationship between the organizational culture and communication
on
employee engagement. Future research is not restricted; it can be
also
implemented in different locations in banks like head office,
branch office,
etc., in order to determine interaction and relationships of
various factors
and effectiveness on employee engagement. These future researches
may
include managers taken from numerous managerial levels that
could
include: junior, middle and senior management levels. The scope of
the
study can also be increased as to expand multiple views of
employee
engagement including job-engagement and organizational engagement.
Case
studies of best practices in employee engagement may also be
included in
the scope of future studies (Sarangi and Swatee, 2012).
Chapter 2: Literature Review
Research conducted by Lucey (2009) found that "Employee engagement
is
how each individual connects with the company and the
customers". Robinson et al. (2004) state that, "engagement has a
positive
reflection towards the organizational goals and values. An
engaged
employee therefore understands and appreciates changing
business
contexts, works effectively as a team member and aims at improving
both
his own and the organization's performance". Wellins and
Concelman
(2004) approve, mentioning that employee involvement can
supply
motivation for exceptional performance.
dimensions of communication are not strictly independent, but in
fact,
related to both perceived job satisfaction and organizational
climate.
Numerous studies have focused on the importance regarding
communication in relation to success of an organization. Also,
showing that
the actual quality of organizational communication is directly
connected
with job satisfaction and motivation of stakeholder within the
organization
(Orpen, 1997).
There are a number of noteworthy relationships which are proven
to
be linked with an increase in productivity which include employee
job
satisfaction, communication and the climate of the organization
(Singh and
Pestonjee, 1990; Joshi and Sharma, 1997). Furthermore, as reported
by
Pettit et al (1997), organizational communication has found to
moderate the
relationship between employee job satisfaction and job
performance.
Strong forecasts can be made to employee commitment when the
quality and nature of information provided by the management
pertaining
to their organizational status, policies and business conditions in
also of
high rate and quality (De Cotiis and Summers, 1987). According to
Mathieu
and Zadjac's (1990) meta-analysis, communication has a positive
affect
regarding the organizational commitment. The importance of
organizational
communication was additional proven by the 2003-04 Watson
Wyatt
Survey. Also, studies show that firms with high quality
communication have
Chapter 2: Literature Review
36
had lower turnover rates in comparison to organizations that don’t
have the
same standard of communication (Gallup, 2006). As noted by Nakra
(2006),
communication is of great importance when discussing the issue
of
employee motivation and their identification with their
organization due to
the relationship that exists and greatly depends on
communication.
After discussing the studies and findings presented in the
sections
above, it can be said that progressive organizational strategy
plays a great
role with internal communications. As reported by Yates
(2008),
organizations that identify the importance of increasing the
communication
skills of its management as a tool to improve employee commitment
are
regarded as more effective. Thus, the effectiveness of
organizational
communication in determining engagement levels is evident and
should be
recognized and used to the advantage of the organization (Nordin et
al,
2011).
Supervisory communication -the code of conduct or methods
that
supervisors use, can be thought of a package used when
communicating
with employees. As advocated by Wellins and Concelman (2004),
depending
on the nature of what employees receive from their superiors, this
can
supply a weighty drive for employee performance. Furthermore
Robinson et
al. (2004) reason, “engagement has a positive reflection towards
the
organizational goals and values. An engaged employee
therefore
understands and appreciates changing business contexts, works
effectively
as a team member and aims at improving both his own and the
organization’s performance”. Hence, the main advantage of this is
as
employees are increasingly included, they are aware of
changing
surroundings. Several researchers (Hackman and Lawler, 1971;
Hackman
and Oldham; 1975, 1976; Ting 1996) highlight that personalities can
be
motivated not solely by an extrinsic need, but that numerous
other
components such as positive job-related factors, task clarity,
skill utilization,
task significance and social interactions can also aid the
promotion of
Chapter 2: Literature Review
motivation. Not only that, studies have confirmed that more
precise
apprehension of job tasks pacifies job uncertainty employees
might
experience (Ting, 1996) and that relationships with co-workers
and
supervisors affect job satisfaction (Brass, 1981; Daley, 1986;
Emmert and
Taher, 1992).
An obvious trend can be noticed when examining the
relationship
between supervisory characteristics and levels of job satisfaction
(London
and Larsen, 1999). For instance, Oldham and Cummings (1996) note
that
employees generate creativity when tasked challenging jobs and
authority
administers in supportive, non-controlling way. London and Larsen
(1999)
believe that employee’s immediate supervisor specifically have a
vital role
in crafting a